Appellate Tribunal upholds penalty for under-invoicing imports violating Section 3(b) of FEMA 1999

The Appellate Tribunal under SAFEMA dismissed the appeal challenging penalty imposed under Section 13 of FEMA, 1999 for under-invoicing imports. The appellant imported goods worth Rs. 6,01,82,311 against declared value of Rs. 1,71,62,087 across 26 Bills of Entry, paying the differential amount in cash to Japanese suppliers in Indian Rupees, violating Section 3(b) of FEMA. The Tribunal held that ED's reliance on DRI's Customs Act investigation was valid as both agencies can share information for enforcement under respective Acts. The appellant's statements recorded over 9 months consistently admitted the contraventions before both DRI and ED. The Tribunal rejected challenges regarding SCN vagueness, change in adjudicating authority, and calculation of penalty amount, confirming the violation and upholding the penalty.

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Issues Involved:

1. Reliance on proceedings conducted by the Directorate of Revenue Intelligence (DRI) under the Customs Act, 1962 for proceedings under the Foreign Exchange Management Act (FEMA), 1999.
2. Competence of DRI to conduct investigations and issue Show Cause Notices under the Customs Act, 1962.
3. Reliance on statements recorded under duress and without corroborative evidence.
4. Vagueness of the Show Cause Notice (SCN) and lack of specific proposal for penalty in the SCN.
5. Jurisdiction of the adjudicating authority to adjudicate the SCN issued by a higher authority.
6. Compliance with procedural requirements under the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000.
7. Determination of "sum involved" for the purpose of imposing penalty under Section 13 of FEMA, 1999.

Detailed Analysis:

1. Reliance on DRI Proceedings:
The appellant argued that the findings from the DRI under the Customs Act should not be used for proceedings under FEMA as the intents of the two Acts are different. The Tribunal found no merit in this argument, stating that while the DRI focused on under-invoicing to evade customs duty, the ED focused on the payment of the differential amount through illegal channels, which are related but distinct contraventions. The ED independently recorded statements under FEMA and verified facts, indicating that the proceedings under FEMA were independent and valid.

2. Competence of DRI:
The appellant contended that the DRI was not competent to issue SCNs under the Customs Act, citing various judgments. The Tribunal held that this issue was irrelevant to the proceedings under FEMA, as the ED is the designated authority for FEMA violations. The competence of the DRI under the Customs Act did not affect the legality of the proceedings under FEMA.

3. Reliance on Statements:
The appellant claimed that statements were recorded under duress and lacked corroborative evidence. The Tribunal noted that the statements were consistent over a long period and were not retracted, indicating they were voluntary. The Tribunal distinguished this case from others cited by the appellant, where statements were retracted promptly and under different circumstances.

4. Vagueness of SCN:
The appellant argued that the SCN was vague and lacked a proposal for penalty. The Tribunal found that the SCN, along with the enclosed complaint and annexures, clearly conveyed specific allegations and the material relied upon. The Tribunal rejected the appellant's contention that enclosing the complaint with the SCN was insufficient.

5. Jurisdiction of Adjudicating Authority:
The appellant contended that the SCN was issued by a Special Director, but adjudicated by an Additional Director, which was improper. The Tribunal found that a change in the adjudicating officer did not necessitate a new SCN, as the proceedings could continue with the new officer, provided the appellant was given a fair hearing.

6. Compliance with Procedural Requirements:
The appellant argued that there was a violation of procedural rules under FEMA, which require a two-stage process for adjudication. The Tribunal found that the adjudicating authority had formed a prima facie opinion before issuing the SCN and had followed the required procedure, thus not violating any rules.

7. Determination of "Sum Involved":
The appellant challenged the determination of the "sum involved" for imposing a penalty, arguing it was based on customs duty evasion figures. The Tribunal found that the amount was based on the differential value admitted by the appellant in his statements and corroborated by other evidence, thus justifying the penalty imposed.

Conclusion:
The Tribunal dismissed the appeal, finding no merit in the appellant's contentions across all issues. The proceedings under FEMA were found to be independent and legally valid, with due process followed in determining the penalty.

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